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Why should condominium owners insure themselves?
Do you own a condominium and belong to a community of owners? As a member of a condominium association, you benefit from basic insurance cover for the common property. However, additional insurance is essential for your personal protection and that of your apartment. We give you an overview of the insurance cover you should and must have as an owner in order to avoid unpleasant surprises and protect your investment.
Compulsory insurance for your condominium
As already mentioned, there are insurance policies that you must take out by law as a condominium owner. However, these are usually covered by the owners' association. As an owner, you should ask your property management company for details of the insurance policies, the cover provided for your property and the premiums to be paid.
1. the building insurance
Buildings insurance with fire insurance is one of these compulsory insurances for condominiums. Although the Condominium Act only mentions fire insurance in the building insurance, it usually also covers water damage, storm and hail.
Buildings insurance is a joint insurance policy of the condominium owners' association, which means that you as the owner do not have to worry about it. Your share of the building insurance is automatically included in your statement. You automatically pay the building insurance as part of your house fee.
Incidentally, damage to the building itself is not covered by buildings insurance. This is where homeowners' insurance comes in.
2. homeowner and landowner liability insurance
In addition to buildings insurance, homeowners' and landowners' liability insurance is another compulsory insurance, which is also listed as a compulsory insurance in Section 21 of the German Condominium Act. You do not have to take out this insurance yourself either. It should also be taken out by your property management company for the community of owners. You also automatically pay for homeowner's and landowner's liability insurance as part of your property management fee. The amounts for this insurance are not usually very high.
This homeowners' and landowners' liability insurance covers damage caused to passers-by who are injured, for example, by black ice, an unlit stairwell, missing fire alarms or falling objects during a storm.
Our tip: A good property management company must be transparent about which insurance has been taken out for the building and on what terms. It also makes sense to review the premiums from time to time and possibly discuss them at the owners' meeting. As a rule, your property manager should seek help from external, professional insurance brokers to check your contracts for cost efficiency and completeness.
Ralph will check all current insurances of your condominium owners' association free of charge on request and can obtain cheaper or better offers for you if necessary. All too often, when we take over a new condominium association, we find that the insurance policies are either overpriced or inadequate. We can often save COAs considerable costs through our favorable framework contracts.
Other insurance policies that may be useful for your condominium
Basically, you don't have to worry about anything if you are part of a WEG. A proactive property management company will check the insurance policies of your condominium without being asked and provide you with the active policies. However, there are other types of insurance that are not required by law but are often useful for the COA as a whole or for you as an individual owner with a condominium.
1. natural hazard liability insurance for WEGs
If the condominium is exposed to a risk of flooding, landslides or avalanches, it should be discussed within the community of owners whether liability insurance for natural hazards is desirable. However, this cannot be taken out individually, but must apply to the entire building. A good property management company can quickly assess the relationship between costs and benefits and make a good recommendation.
However, insurance against natural hazards is relatively expensive. And not every house is exposed to this risk, so such insurance does not always pay off.
2. household insurance
Contents insurance generally covers damage caused by burglary, power surges, loss or damage due to theft or water damage caused by the dishwasher or washing machine. Whether you are an owner or tenant, household contents insurance for your home is indeed recommended in most cases. You are free to decide to what extent and how much you want to take out and what it should cover.
The insurance cover not only extends to your home, but also protects your property in the cellar and garage. If you have to leave your home temporarily due to damage, your household contents insurance may also cover the costs of accommodation, cleaning up and storing your belongings.
Our tip: Generally speaking, if you don't keep expensive furniture and objects in your home, you don't need expensive household insurance. However, household insurance is often worthwhile for apartments with an increased risk of burglary (varies depending on the area, first floor apartments are most likely to be at risk).
3. apartment liability insurance
Do you rent out your condominium? Then home liability insurance could be a useful addition to your personal liability insurance. Let's assume that you or your tenants cause a fire that spreads to the neighboring apartment. Or you are forced to have the entire locking system replaced because the keys have been lost. This can be really expensive for large condominiums.
4. legal expenses insurance
It is questionable whether legal protection insurance is worthwhile for owners, because unfortunately, depending on the insurance, many of the matters that are actually urgently relevant are often excluded. If there is friction in the WEG, which you would like to challenge legally, the legal protection insurance often does not step in. You should urgently read the fine print of the contract to see if this is the case.
However, there are special legal protection insurance policies for owners that cover precisely these cases. However, these are usually very expensive. Insurance that specifically covers you against legal disputes with your tenants is often also available separately and may make sense.
The benefits of landlord's legal protection for tenants offer you comprehensive protection. The benefits include, for example
- Initial legal advice: Telephone advice from lawyers on legal issues relating to the tenancy.
- Assumption of costs in the event of legal disputes: Assumption of the costs for your lawyer, court costs and experts.
- Rapid dispute resolution: Support with out-of-court dispute resolution to avoid legal disputes.
- Enforcement: assumption of the costs for the enforcement of your claims by bailiffs
- Help with rent arrears: Support with the collection of rent arrears.
- Additional protection: Optionally, insurance against loss of rent can be taken out to cover financial risks.
5. loss of rent insurance
Which brings us straight to the next possible insurance, rent default insurance. If you had to take out a large loan to pay for the condominium and are dependent on the rental income to repay it, protection against payment default makes perfect sense. It not only covers the income from the rent, but also the ancillary costs. However, it is essential to read the small print carefully here too, as some things may be excluded.
6. residual debt insurance
Residual debt insurance provides cover in the event that the buyer and borrower can no longer service the property loan, for example due to job loss or serious illness. The insurance cover steps in and pays the remaining loan installments. In addition to residual debt insurance, term life, occupational disability and accident insurance also offer protection against financial risks in connection with a property.
7 Advisory board liability insurance
The support of the condominium owners' association by a management advisory board makes sense, but can also entail a certain risk for the management advisory board itself. If the management advisory board makes a mistake - for example when checking an annual statement of accounts - and causes damage to the condominium owners' association, the management advisory board can be held personally liable. In such cases, advisory board liability insurance covers the costs of legal disputes and possible claims for damages.
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Condominium insurance: Is it tax-deductible?
The question of whether insurance premiums for your condominium are tax-deductible depends largely on whether the condominium is owner-occupied or rented out.
- Owner-occupied condominium: The insurance premiums for a condominium that the owner lives in are generally not deductible from income tax as special expenses. This applies, for example, to homeowners' insurance.
- Rented condominium: In the case of a rented condominium, the costs of insurance, such as homeowner's insurance, homeowner's and landowner's liability insurance or legal expenses insurance, can be claimed as business expenses or income-related expenses. However, the requirements and the exact tax treatment depend on the individual circumstances and should be clarified on a case-by-case basis with advice from a tax consultant.
What insurance can owners pass on to their tenants?
As a landlord, you can pass on certain insurance costs to your tenants. The cost of repairing storm damage to the roof of the property is usually covered by the building insurance. As this insurance is apportionable, the corresponding costs can be passed on to the tenants. This also applies to homeowner's and landowner's liability insurance.
In contrast, the costs of a legal dispute with tenants, which are covered by landlord's legal expenses insurance, must be borne by the owners themselves.
What happens to the insurance policies when they are sold?
If the entire building is sold, the buildings insurance is automatically transferred to the new owner. If an apartment in an apartment building is sold, the existing homeowners' insurance remains in place for the entire building.
Do you already know Ralph?
As a modern property management company, we attach great importance to personal support and innovative solutions. Benefit from our comprehensive service, especially when it comes to advice on insurance for condominium owners' associations. We are sure to find the optimum cover for your WEG. Switch to Ralph now.
